John R. Graham is a financial, economic, and policy analyst in the health sector. His appointments include:
Senior Fellow of The National Center for Policy Analysis;
Senior Fellow of The Independent Institute;
Senior Fellow of the Pacific Research Institute;
Senior Fellow of The Fraser Institute;
Adjunct Scholar of The Mackinac Center for Public Policy;
Columnist at Forbes.com's The Apothecary blog;
Member of the Board of Visitors of The Benjamin Rush Society of medical students and physicians.

A Look Back at Year One of The Apothecary at Forbes

One year ago, I moved my little health-care blog from avikroy.org over to Forbes.com. And what a year it’s been. There has been no shortage of things to write about—and thanks to the paramount importance of entitlement reform and health policy, that will continue to be true for the foreseeable future. So I wanted to take the chance to reflect on The Apothecary’s year that was.

One important change is that two eminent health-policy thinkers joined me at The Apothecary, John R. Graham and Robert A. Book. John, who I wrote about last summer, is Director of Health Care Studies at the Pacific Research Institute, a San Francisco-based think tank, and Executive Director of the Benjamin Rush Society, which strives to build free-market-oriented medical student groups akin to the Federalist Society. Robert is an outstanding health economist and consultant who came to my attention when he was at the Heritage Foundation, where he definitively debunked the myth that Medicare has lower administrative costs than those of private insurers.

I continue to be on the lookout for health policy writers who are interested in contributing to The Apothecary. If you’re interested, drop me a line.

I also want to thank you, our readers, for your interest and your feedback, especially when I get something wrong. You’ve made The Apothecary one of the most influential health policy blogs on the Internet. Whether you’re an ordinary citizen or a prominent federal official, I read it all–though I apologize that I can’t always respond. I especially appreciate feedback from those of you who toil in the trenches on health care, whether as health-care providers, or wonks in state and local government.

Thanks also to the Heartland Institute and the Manhattan Institute, two think tanks that did much to support my work over the past year. A special shout-out goes to my growing list of sources in Washington—you know who you are—who help me bring actual news to the public.

There’s some overlap between what was most popular with you guys and the pieces I most enjoyed writing. I particularly enjoyed exposing a number of the myths associated with the health-care debate. The myth of Medicare’s low administrative costs is routinely put forth by those who advocate government-run health care. That myth is also behind Obamacare’s deeply misguided mandates on private insurance medical loss ratios.

And how many times have we heard, wrongly, that we need to adopt socialized medicine because Americans’ life expectancy lags that of the developed world, when in fact we’re number one? Then there’s the bipartisan way in which Mitt Romney, Newt Gingrich, and President Obama exaggerate and mischaracterize the free rider problem in order to justify forcing everyone to buy health insurance. And we can’t forget about the fraudulent nonsense perpetrated by Elizabeth Warren and others about the supposed frequency with which bankruptcies are caused by a lack of health insurance.

The CLASS Act

My aforementioned Washington sources helped me bring attention to a number of important developments related to Obamacare.

The #1 most-viewed blog post this past year was one such story: of how the Administration was attempting to quietly kill Obamacare’s long-term care entitlement, called CLASS. (They eventually chose to “suspend” the law.) In another piece, I discovered that the heavily overworked Joint Committee on Taxation had provided Congress with a mistakenly outdated estimate of the cost of Obamacare’s exchanges, on the eve of the key House vote on the law. I did a lot of work on the CLASS Act, which you can find by scanning the right-hand column on The Apothecary’s home page. This week, the House of Representatives will be voting to repeal CLASS.

Employer dumping and the Obamacare exchanges

A McKinsey survey highlighted the enormous fiscal risk posed by the likelihood that employers will dump health coverage for many of their employees who are now eligible for Obamacare’s subsidies. If the government’s estimates are slightly off, taxpayers will be on the hook for trillions in additional spending on the subsidies. Furthermore, the subsidies will remove 8 million more Americans from the income tax rolls, further weakening the popular appetite for entitlement reform.

But of course, it’s not enough to complain about how bad everything is—it’s important to come up with solutions. I published a big piece on Medicare reform in National Affairs, excerpts of which I posted here at Forbes.

George W. Bush has shown the path to real reform, as his controversial, market-oriented Medicare drug benefit has proven that competition drives down costs. Remarkably for a government program, Part D premiums declined in 2012 vs. 2011. If a Democratic President had achieved this, we’d never hear the end of it.

And Paul Ryan’s plan takes advantage of what we’ve learned from Part D. Indeed, the Ryan Plan is properly seen as an attempt to bring Part D’s innovations to the rest of Medicare. Tom Coburn and Joe Lieberman also made a significant contribution to the debate, especially with their proposed reforms of Medicare’s cost-sharing provisions: one of the biggest drivers of runaway Medicare spending.

Democrats clearly intend to demagogue Ryan’s reforms by claiming that Republicans aim to “end” Medicare—PolitiFact’s “lie of the year”—but Mark Amodei of Nevada showed Republicans how to win an election despite these tactics. From a policy perspective, the important thing to realize is that Obamacare cuts Medicare almost as aggressively as Paul Ryan does. But it does so through forced rationing rather than voluntary choice.

One of the least-covered, but most important, drivers of the high cost of health insurance is the power of hospital monopolies to jack up prices. Accountable Care Organizations, one of the most ballyhooed aspects of Obamacare’s “reforms,” will exacerbate this problem. One intriguing approach to undermining hospital monopolies is promoting medical tourism through bi-national health insurance, as Rick Perry has explored in Texas.

The FDA

The FDA is the biggest roadblock to improving the pace of medical innovation. However, I defended the FDA from conservatives when the agency revoked approval for Avastin in breast cancer. Many on the Right saw this as a form of rationing, but it was nothing of the sort: Avastin has yet to prove that it works in breast cancer, and insurers are continuing to pay for its use there despite the FDA’s actions.

One of the biggest failures of conservatives has been that they haven’t coalesced around a market-oriented approach to comprehensive health reform. Switzerland provides the most compelling model for reform: a highly competitive, private-sector system which involves a fraction of U.S. government spending. Paul Ryan recently proposed a variation on an old John Goodman plan, by providing a universal tax credit for health insurance. Neither of these approaches, sadly, has been a part of the 2012 Republican campaign. Either would be a dramatic improvement on our wasteful employer tax exclusion, which adds $300 billion a year to the deficit.

The 2012 GOP race

As you know if you’ve been here lately, I’ve been writing a lot about the health care positions of the various Republican candidates for President. The dumbest thing I said about the race was back in August, where I described it as a “two-man race” between Mitt Romney and Rick Perry. However, that misperception led me to compile some interesting statistics comparing the quality and cost of health care in Texas and Massachusetts.

None of the candidates are perfect on health policy, and I’ve posted challenging questions I’d ask each of them in a Presidential debate. Michele Bachmann was content to attack Obamacare without providing any constructive proposals of her own. Ron Paul, supposedly the libertarian in the race, has explicitly backed away from Medicare reform.

On a policy basis, the top conservative performer on health policy was Jon Huntsman, who wholeheartedly endorsed Paul Ryan’s entitlement reforms, while also promoting bold tax reform that would have eliminated the aforementioned deduction for employer-sponsored health insurance. It’s a shame that he felt the need to mock and deride the very voters whose support he sought.

Rick Santorum comes second to HuntsmanHuntsman: he also fully supported the Ryan plan, and has been the only candidate to make a substantive policy critique against Romneycare. Santorum was a leader in the fight to legalize health savings accounts, though he also supported the various government health-care expansions of the 1990s. I give the nod to Huntsman mainly because Santorum doesn’t do much on the employer tax exclusion.

Herman Cain’s 9-9-9 plan would also have eliminated the employer tax exclusion, but he had little of substance to say on Medicare.

Rick Perry was less aggressive than expected in his own proposals for entitlement reform. His team decided to forego a detailed plan until the general election, which they said would combine concepts from Paul Ryan, Lieberman-Coburn, and Jim DeMint. (Perry insiders, however, told me that the Perry camp was not especially enthusiastic about Paul Ryan’s approach.)

Newt Gingrich is the worst of all. He described Ryan’s reforms as “suicide” and “right-wing social engineering.” He now excoriates Romney for Romneycare, but Gingrich was a huge fan of the law in 2006, as I describe below. He supported the individual mandate as recently as May of 2011.

Some conservatives question whether or not Romney is committed to repealing Obamacare. Based on my conversations with the Romney campaign, I’m convinced that he is: he sees that position as the best antidote to his otherwise-toxic implementation of Romneycare in Massachusetts. As a bonus, Romney has declared that he will use the reconciliation process to repeal the law, something that is eminently doable.

The outstanding question is this: will Mitt Romney be able to make the case that Obamacare is bad, while continuing to defend Romneycare? Rick Santorum doesn’t think so, and neither do many conservatives. We’ll find out in 2012.

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